What does the 'Expenditure Method' of calculating GDP NOT explicitly include in its primary formula?

Correct Answer: Depreciation

Subject: economics

• Consumer spending
• Government expenditure
• Depreciation
• Net Exports (Exports - Imports)

Explanation: • <b>Key Fact</b> The Expenditure formula for GDP is C + I + G + (X - M). • <b>Supporting Detail</b> This calculates Gross Domestic Product. Depreciation is only subtracted later to find Net Domestic Product. • <b>Related Concept</b> C = Consumption, I = Investment, G = Govt Spending, (X-M) = Net Exports. • <b>Why wrong options are wrong</b> Therefore, depreciation is not an additive component of the direct expenditure calculation method. • <b>Exam Trick</b> Expenditure formula purely tracks where the money was spent (Consumption, Investment, Govt, Trade). • <b>Additional Info</b> If households save more instead of spending (leakage), aggregate demand in this formula drops.

Loading Gyaanify...